Can Microsoft Break a Legacy of Insular, Siloed Behavior?

Microsoft reminds me of Sony. A history of engineering excellence. A
culture where the engineer is king. Preservation of this culture even
as growth forced greater functional responsibility and a siloed
organization. The curse of scale and a rigid corporate hierarchy moving
the company farther and farther away from the customer. And, of course,
the predictable disconnects between the needs of the market and the
products released from these engineering-driven organizations.

But a
recent piece in carried in Computerworld indicates that Microsoft might be trying to shake things up a bit, by bringing in outsiders at senior levels to drive change.

Before Brian McAndrews agreed to take charge of a crucial piece of Microsoft Corp.'s
online advertising business, he insisted on a key condition: that he be
granted certain power over the engineering part of the operation.

The new job didn't have to include that authority, but McAndrews, new
to the company, argued that to succeed in his mandate -- leading the
charge against Google Inc.
-- he needed it. And in Microsoft's engineering-driven culture, such a
team could promise something else for McAndrews: longevity as a
Microsoft executive.

That Microsoft granted his request illustrates a new approach Chief Executive Steve Ballmer
is taking as he tries to expand the software company into new areas
from online music to videogames to Internet advertising. Ballmer has
found he must tap outsiders rather than rely so heavily on homegrown
managers as in the past.

How Microsoft fares with McAndrews will be a test for Ballmer, who has
tried over the years to make the company a more hospitable place for
outside talent. Another test will be Don Mattrick, whom Microsoft hired
this summer to head its videogame group after a long career as a top
executive at game giant Electronic Arts Inc.

The
stakes are huge. Microsoft has a long, long way to go to make up ground
on Google in advertising, and by giving an outsider the keys to the
operation Steve is admitting something very important: that being born
and bred by Microsoft doesn't necessarily imbue you with super-powers
that make you best suited to run a strategically critical business.
This is so unlike Microsoft. I am truly impressed.

Still, a combination of forces within Microsoft -- its engineers'
exalted stature, its insular culture, its sheer size -- make
integrating new executives a lingering problem. Often through
Microsoft's history, decisive and aggressive outsiders have been worn
down by the second-guessing of Microsoft veterans before stepping down
to less-prominent roles or leaving altogether.

********************

That is one reason Kevin Johnson, president of Microsoft's Platforms
and Services division and McAndrews's new boss, says he is trying to be
hands-off. "He's used to being CEO," Johnson says of McAndrews. "If you
let him run his business and let him achieve the goals he wants to,
we'll be fine."

McAndrews comes into a group that is known for clashes between the
advertising and technical sides of Microsoft. He may able to avoid such
disruptions thanks to his insistence that he have an engineering team.
His job is to manage the relationships with ad agencies and the Web
sites that run advertisements. By controlling an engineering team, he
also oversees the technology for buying and selling online ads.

Mr.
McAndrew's is no dummy - he is leaving nothing to chance. Control over
the entire value stack for his organization, severing dependence on the
legacy engineering team that would invariably have messed with him once
they disagreed with his strategic vision. But the fact remains that
Steve and Kevin are letting this happen, and running an experiment
that, IMHO, holds one of the keys for whether or not Microsoft is going
to once again become a growth stock or to remain mired in bureaucracy,
milking the OS business and failing at everything else. If Steve and
Co. can't shake up the culture now, when competitive challenges have
never been stiffer, then the game is over. They should just admit
they're an oil well and cash their OS royalty checks until it runs out.
But for now they're taking one last swing. Hopefully they connect.